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Structural Balances and All That

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  • Nigel Andrew Chalk
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    Abstract

    Structural indicators of a country''s fiscal position are regularly used as estimates of both discretionary changes in fiscal policy and the effect of fiscal policy on aggregate demand. This paper looks at such indicators and evaluates, from a theoretical standpoint and from empirical case studies, their usefulness in measuring the size of discretionary policy action or fiscal demand stimulus. Two propositions are examined in detail: first, that the change in the primary structural balance provides a better indicator of discretionary fiscal policy than does the change in the primary balance; and second, that the change in the structural balance is a good indicator of the demand stimulus arising from changes in the fiscal position. In addition, the paper discusses measurement problems relating to structural balances and the use of the fiscal impulse as an alternative to structural balances.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 02/101.

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    Length: 31
    Date of creation: 01 Jun 2002
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    Handle: RePEc:imf:imfwpa:02/101

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    1. Olivier Blanchard & Roberto Perotti, 1999. "An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output," NBER Working Papers 7269, National Bureau of Economic Research, Inc.
    2. Braconier, Henrik & Holden, Steinar, 1999. "The Public Budget Balance - Fiscal Indicators and Cyclical Sensitivity in the Nordic Countries," Working Paper, National Institute of Economic Research 67, National Institute of Economic Research.
    3. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 98(5), pages S103-26, October.
    4. Sweta Chaman Saxena & Valerie Cerra, 2000. "Alternative Methods of Estimating Potential Output and the Output Gap," IMF Working Papers 00/59, International Monetary Fund.
    5. Adam S. Posen, 1998. "Restoring Japan's Economic Growth," Peterson Institute Press: All Books, Peterson Institute for International Economics, Peterson Institute for International Economics, number 35, July.
    6. Blanchard, Olivier Jean & Kiyotaki, Nobuhiro, 1987. "Monopolistic Competition and the Effects of Aggregate Demand," American Economic Review, American Economic Association, American Economic Association, vol. 77(4), pages 647-66, September.
    7. Robert P. Hagemann, 1999. "The Structural Budget Balance," IMF Working Papers 99/95, International Monetary Fund.
    8. Claude Giorno & Pete Richardson & Deborah Roseveare & Paul van den Noord, 1995. "Estimating Potential Output, Output Gaps and Structural Budget Balances," OECD Economics Department Working Papers 152, OECD Publishing.
    9. Olivier Jean Blanchard, 1990. "Suggestions for a New Set of Fiscal Indicators," OECD Economics Department Working Papers 79, OECD Publishing.
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    Cited by:
    1. Maria Neycheva, 2005. "The Impact of the Fisc on Macroeconomic Fluctuations in Bulgarian Economy," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 42-59.
    2. Jeromin Zettelmeyer & Ivanna Vladkova Hollar, 2008. "Fiscal Positions in Latin America," IMF Working Papers 08/137, International Monetary Fund.
    3. Luca Agnello & Jacopo Cimadomo, 2012. "Discretionary Fiscal Policies over the Cycle: New Evidence Based on the ESCB Disaggregated Approach," International Journal of Central Banking, International Journal of Central Banking, International Journal of Central Banking, vol. 8(2), pages 43-85, June.
    4. Mati, Amine & Thornton, John, 2008. "The exchange rate and fiscal consolidation episodes in emerging market economies," Economics Letters, Elsevier, Elsevier, vol. 100(1), pages 115-118, July.
    5. Gábor P. Kiss, 2007. "One-off and off-budget items: An alternative approach," MNB Conference Volume, Magyar Nemzeti Bank (the central bank of Hungary), Magyar Nemzeti Bank (the central bank of Hungary), vol. 1(1), pages 18-27, December.
    6. P. Kiss, Gábor & Vadas, Gábor, 2005. "Légy résen! Az államháztartási egyenleg ciklikus igazítása
      [Be on your guard! Cyclically adjusted budget deficit]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(2), pages 109-129.
    7. Richard M. Bird, 2003. "Fiscal Flows, Fiscal Balance, and Fiscal Sustainability," International Center for Public Policy Working Paper Series, at AYSPS, GSU, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University paper0302, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    8. Daniel Kanda, 2011. "Modeling Optimal Fiscal Consolidation Paths in a Selection of European Countries," IMF Working Papers 11/164, International Monetary Fund.
    9. Renee Philip & John Janssen, 2002. "Indicators of Fiscal Impulse for New Zealand," Treasury Working Paper Series 02/30, New Zealand Treasury.

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